Market Turning Poiints

Precision timing
for all time frames through a multi-dimensional approach to
forecasting
using technical analysis: Cycles - Breadth - P&F and Fibonacci price projections
supplemented by Elliott Wave analysis

"By the Law of Periodical Repetition, everything which has
happened once must happen again, and again, and again -- and not capriciously,
but at regular periods, and each thing in its own period, not another's,
and each obeying its own law... The same Nature which delights in periodical
repetition in the sky is the Nature which orders the affairs of the earth.
Let us not underrate the value of that hint." ~ Mark Twain

Current Position of the Market

SPX Long-term trend: A lengthy correction is most likely underway!

SPX Intermediate trend: The H&S pattern has been invalidated and
the index is re-testing the upper portion of its trading range.

Analysis of the short-term trend is done on a daily basis with the
help of hourly charts. It is an important adjunct to the analysis of daily
and weekly charts which discuss longer market trends.

Daily
market analysis of the short term trend is reserved for subscribers. If you
would like to sign up for a FREE 4-week trial period of daily comments, please
let me know at ajg@cybertrails.com.

CONSOLIDATION OR DISTRIBUTION?

Market Overview

On a long-term and intermediate-term basis, the SPX is the strongest of all
the major indexes. The Dow Industrials, which had been keeping pace with it,
has recently begun to fall behind. On a short-term basis, SPX is close to reaching
some projections which should bring a reversal when they are met. Because of
this, and because of resistance directly above its current level, last week
I mentioned that moving much higher could be a difficult task. For the past
week, it has been trading in a 20-point range, again re-testing the 2085 level
on Friday after the release of a weak jobs report, but re-bounding once more
toward the top of the range by the close.

If, as cycles appear to imply, this is short-term distribution, there is probably
enough of a count already accumulated to send it back down to the 2050-55 support,
at least - providing that it can break decisively below 2085 with sufficiently
negative breadth. On Friday, the weak jobs numbers initially brought about
some good selling, but then it probably dawned on traders that such weakness
might delay even more any interest rate increase by the Fed, and the selling
turned to buying. Will this bullish thinking prevail as we start another week
of trading?

Benefiting from the weak report, the precious metals group had its best performance
in six weeks, while the USD slumped on the news. But that did not help oil,
which was disappointed that OPEC did nothing to curb production at its Thursday
meeting.

SPX Chart Analysis

Daily chart(This chart, and others below, are courtesy of QCharts.com.)

The same trend lines and former peaks which were discussed in detail last
week remain intact and should continue to provide overhead resistance if the
index makes an attempt at moving higher. On Friday, there was a slight breach
of the minor uptrend line, but prices rallied to close on it, so no real harm
was done. For a decline to get underway, the 2085 level (marked by a red horizontal
line) will have to give way, but even that would not create too much of a pull-back
unless there is enough follow-through to break the black channel line with
a close well outside of it. Should that happen, the 2040 level could be re-tested.
Because we should be at the top of short-term cycle which could cause the index
to decline into the third week of the month, the odds favor a correction but,
since short-term upside projections have not yet been reached, prices could
extend a little higher first.

If we fail to develop very much weakness over the next couple of weeks, the
odds of making a new high will increase, especially if we cannot break outside
of the black channel. Even if we do, holding above the 2040 level may still
bring another challenge to the current bull market high. For now, the indicators
seem to favor the downside. They have started to roll over with the A/D oscillator
already being in a minor downtrend, which amounts to negative divergence with
price. For real weakness to develop, however, we will need to see this indicator,
as well as the MACD, go negative right away.

Prices have moved outside of the smaller black channel, but without bringing
much weakness. On Friday, the index found enough support at the 2085 former
low and on the dashed trend line to re-bound in what could be a back-test of
the broken channel line. If so, we could move a little higher on Monday to
complete that test, or start down and break the lower red support line right
away.

Both the 8hr and 21hr MAs have flattened out and will need to be penetrated
on the downside once again, with a follow-through break below 2085 to give
a short-term sell signal. Support at this level comes from the two short-term
peaks at the left of the chart.

The indicators are also moving sideways, following the price trend. They will
have to turn down sharply to signal the beginning of a correction.

In the group of charts below, I have moved the SPX in the middle of the top
row, and placed the DJIA above the TRAN for better comparison. Last week's
action did nothing to unify the trends of the various indexes. The DJIA and
TRAN got a little weaker relative to SPX, while IWM became stronger - although
it is only catching up a little after lagging behind considerably. The DJIA
and TRAN are also the only two who are already trading outside of their larger
channels. XBD is right on it and should be the next one to break it.

With the two DOWs coming out of their channels, especially if XBD and the
others follow, it will become a picture which suggests slowly rolling to the
downside. But it will require some sustained weakness for this to take place
and, for now, all we can do is wait to see what comes next.

The dollar's demise sent shorts in gold running for cover. If you remember,
commercial COTs had a huge short position. Are they wrong? GLD is a long way
from resuming its uptrend, and this could be only a consolidation in a downtrend,
but the miners fared a lot better. Now it's a question of whether or not they
can muster follow-through strength.

USO ran into resistance where expected, but the set-back of the dollar prevented
it from being affected negatively by the OPEC decision not to curb oil production.
A greater pull-back is likely in the next few days.

Summary

The extension of the SPX rally has run into resistance and stalled. At the
same time, it has essentially reached an area of short-term projections. If
it cannot break out to a new short-term high and regain its upside momentum,
it will attract sellers and reverse its trend -- especially if it moves and
closes below 2085.

FREE TRIAL SUBSCRIPTON

Market Turning Points is an uncommonly dependable, reasonably
priced service providing intra-day market updates, a daily Market Summary,
and detailed weekend reports. It is ideally suited to traders, but it can also
be valuable to investors since highly accurate longer-term price projections
are provided using Point & Figure analysis and Fibonacci projections. Best-time
reversal estimates are obtained from cycle analysis.

For further subscription options, payment plans, weekly newsletters,
and for general information, I encourage you to visit my website at www.marketurningpoints.com.
By clicking on "Free Newsletter" you can get a preview of the latest
newsletter which is normally posted on Sunday afternoon (unless it happens
to be a 3-day weekend in which case it could be posted on Monday).

The above comments and those made in the daily updates and the
Market Summary about the financial markets are based purely on what I consider
to be sound technical analysis principles. They represent my own opinion and
are not meant to be construed as trading or investment advice, but are offered
as an analytical point f view which might be of interest to those who follow
stock market cycles and technical analysis.

The above comments about the financial markets are based purely on what I
consider to be sound technical analysis principles uncompromised by fundamental
considerations. They represent my own opinion and are not meant to be construed
as trading or investment advice, but are offered as an analytical point of
view which might be of interest to those who follow stock market cycles and
technical analysis.